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Question 5 Explain Bond Pricing Principle#5 : An increase in yields will result in a smaller bond price change than a decrease in yields of

Question 5

Explain Bond Pricing Principle#5: An increase in yields will result in a smaller bond price change than a decrease in yields of equal magnitude.

a.

This phenomenon occurs because a bond's pricing function is convex rather than linear.

b.

This phenomenon occurs when a traditional yield curve is present.

c.

This phenomenon occurs because lower yields magnify the discount rate.

d.

This phenomenon occurs when the bonds duration exceeds its maturity.

e.

This phenomenon occurs because a bond's pricing function is inverse to the yield function.

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